District Board, Fyzabad v. Mst. Ram Kishor — 1946 DIGILAW 206 (ALL)

JUDGMENT Misra and Kaul, JJ. - The suit which gives rise to this appeal was for recovery of Rs. 5,000 on the basis of two surety bonds executed by Bhawani Prasad in July, 1929 in favor of the District Board, Fyzabad. The executants were an accountant in the service of the Board. The first deed was for Rs. 10,000 and the second for Rs. 3,000. A few days after the execution of these deeds Bhawani Prasad died. Subsequently embezzlement to the extent of Rs. 10,500 were discovered, and in 1932 the Board instituted a suit in the Court of the Subordinate Judge, Fyzabad, for recovery of the amount against Bhawani Prasad's widow Mst. Ram Kishori and another person by the name of Jugul Kishore who was an engineer and was alleged to be also concerned. A simple money decree for Rs, 10,500 was obtained on 28th April, 1933 against both persons, but so far as Mst. Ram Kishore was concerned, the decree was confined to the assets of Bhawani Prasad. Nothing could be realized by the Board on the basis of the aforesaid decree and a fresh suit has, therefore, been now filed on the foot of the two deeds of 1929. A part of the hypothecated property was meanwhile purchased at an auction sale by Babu Murli Dhar. The District Board claimed that it was entitled to realize the money due to it , by sale of the property hypothecated untidier the deeds of 1929, but since its value was not more than Rs. 5.000 the claim was confined to that amount. The suit was resisted on a variety of grounds which need not be stated in detail. The learned Additional Civil Judge, Fyzabad, disposed' of the case on a preliminary issue holding that the suit was barred by Order 2, Rule 2, CPC The learned District Judge in appeal agreed with that view and dismissed the appeal. The District Board of Fyzabad bas now come up to this Court by way of second appeal. 2. The point for determination, therefore, relates only to the bar of Order 2, Rule 2 CPC We have heard lengthy arguments at the bar and have considered the matter fully. We are of opinion that the decision of the Courts below is correct, and this appeal ought to be dismissed. 2. The point for determination, therefore, relates only to the bar of Order 2, Rule 2 CPC We have heard lengthy arguments at the bar and have considered the matter fully. We are of opinion that the decision of the Courts below is correct, and this appeal ought to be dismissed. The contention on behalf of the Appellant is that the present suit is competent under Order 34, Rule 14, Sub-rule (l) which lays down that where a mortgagee has obtained a decree for the payment of money in satisfaction of a claim arising under the mortgage, he must bring a fresh suit for sale in enforcement of the mortgage if he desires to bring the mortgaged property to sale. The sub-rule expressly provides that the institution of such a suit would be competent notwithstanding anything contained in Order 2, Rule 2, CPC The latter rule is directed against two matters, the splitting up of claims and the splitting up of remedies. It provides that if the Plaintiff does not include any portion of his claim to which he is entitled or any remedy which he can get in respect of a cause of action he cannot sue later for the portion of the claim or the remedy which he has omitted. The explanation appended to Rule 2 lays down that for the purposes of that rule an obligation and a collateral security for its performance and successive claims arising under the same obligation must be deemed to constitute but one cause of action. That the hypothecation bonds constituted collateral security within the meaning of the above explanation doss not admit of much doubt. The previous suit, therefore, based on the obligation and independent of the collateral security would bar the subsequent suit based on the bonds, unless Rule 14, of Order 34 could be invoked by the Plaintiff One of the essential ingredients for the application of Rule 14 is that the earlier decree for payment of money must have been "for satisfaction of a claim arising under the mortgage." It will be remembered that u/s 99 of the Transfer of Property Act as it existed prior to its amendment in 1929, even if the claim on which the money decree was obtained was unconnected with the mortgage, a subsequent suit based on the mortgage was permissible. That section has now been omitted from the Transfer of Property Act and has been incorporated in an amended form in the Code of Civil Procedure. The rule, as it now obtains, insists on fulfillment of the condition that the previous money decree must have been obtained "on a claim arising under the mortgage.' Is it permissible then to say that the earlier suit based upon the defalcation was in satisfactory ion of a claim arising under the mortgage? Ex. 7 is the plaint of that suit. It averred that Bhawani Prasad conspired with Jugul Kishore to defraud the Board of its money and that they embezzled a considerable amount out of which Rs. 10,500 was claimed. The suit was founded upon misconduct of Bhawani Prasad Ex. 8 was the written statement of Mst. Ram Kishori. It denied the Plaintiffs' allegation about misconduct and disclaimed responsibility for embezzlement of any. Ex. 19 is the judgment of the learned Subordinate judge Fyzabad. One of the pleas with which it dealt related to the maintainability of the suit on the ground that the registered deeds executed by Bhawani Prasad had already compensated the Plaintiff for all loss. The Court upheld the Plaintiff s pleas and decreed the suit, A perusal of these documents would indicate that the claim then see up was independent of the deeds of 1929. therently the deeds and the liability for the embezzlements were, no doubt, interconnected in his manner that if the sum found due, on account of embezzlement was satisfied, there could be no further liability under the bonds In this sense the latter constituted a collateral security. It is impossible, however, to say that the earlier suit was for payment of money in satisfaction of a claim arising under the bonds within the meaning of Rule 14. By force of the explanation attached to Order 2, Rule 2, an obligation and a collateral security couture but one cause of action, it is clear, therefore, that if a suit is brought on the obligation alone the collateral security cannot be availed of in a separate suit. It would seem that the District Board had three remedies, one based on embezzlement the second on personal liability contained in the deeds. The third remedy was against the property. In the first suit the claim was founded only on the obligation arising out of the embezzlement. It would seem that the District Board had three remedies, one based on embezzlement the second on personal liability contained in the deeds. The third remedy was against the property. In the first suit the claim was founded only on the obligation arising out of the embezzlement. The collateral Security which was a part of the same cause of action was ignored and could no longer be available for a subsequent suit, it is only if the earlier suit was based on the personal liability contained in the security bonds that Order 34, Rule 14 cold be of assistance to the Plaintiff. 4. Reliance was placed by the Learned Counsel for the Appellant on a number of decided cases. The most important amongst them is Bank of Bihar Ltd. v, Omttave Chntterji A.I.R.1940 Patna 283. There the manager of a Bank in consideration of his appointment to the post of a manager and for the due and proper discharge of his duties agreed to furnish security to the extent of Rs. 4,000 and transferred his house by deed to the Bank in pursuance of the agreement. The document contained a provision that the Bank would recovery the house to the manager in the event of his removal from the post. It appears that after the discharge of the manager the Bank sued him for accounts and for the amounts due in respect of the losses occasioned by the Defendant's negligence. It obtained a decree on the basis of an arbitration award and realized various sums from time to time. In respect of balance due upon that decree a could suit was instituted and the Plaintiff prayed for sale of the property charged by the deed, The trial Court and the Court of first appeal dismissed the subsequent suit holding that it was barred by Order 2, Rule 2, CPC In second appeal Harries C.J. with whom Dhavle, J., agreed observed as follows: When the Plaintiff sued Ashutosh Chatterji in earlier suit and obtained a decree for only Rs. 4,000, it certainly obtained a decree for the payment of money in satisfaction of a claim arising under charge. The property was charged with the payment of money due from Ashutosh Chatterji to the Bank by reason of the farmer's misconduct or neglect. 4,000, it certainly obtained a decree for the payment of money in satisfaction of a claim arising under charge. The property was charged with the payment of money due from Ashutosh Chatterji to the Bank by reason of the farmer's misconduct or neglect. It was in respect of that money that a decree was obtained, and in my view, it was clearly a decree for the payment of money in satisfaction of a claim arising under the charge. If that money had been paid, the charge would clearly have been extinguished. In my judgment the provisions of Order 34 Rules 14 and 15 clearly apply to this case, and the Plaintiff Bank was entitled to bring a suit for money in the first place and subsequently to bring a suit for enforcement of the Purge. 5. The report deeps not indicate the basis upon which the earlier suit was founded, and we are unable, therefore, to say whether it was or was not filed independently of the deed. If it was, we respectfully dossiers from the view as the decree obtained on the obligation atone would by force of she explanation appended to Order 2, Rule 2, extinguish the cause of action founded on the collateral security bond. We are unable to visualize to ourselves cases to wok the explanation would apply if it was to be ruled that where a decree based on a claim arising out of the initial obligation without any reference to the. deed had already been secured, the relative security bond could be nevertheless made the basis of a second suit by reason of Order 34, Rule 1. 6. The next case is Umeshwar Prasad Singh v. Dwarika Prasad (1943) 22 Pat 320. There a lease was executed in retest of the property covered by the us unfructuary mortgage, and it was to take effect from the date on which the hypothecation bond was given. The mortgagee was to receive from the mortgagor year after year a fixed sum of Rs. 432 per year which was interest at three per cent per annum on the principal sum. The terms of the lease indicated that the mortgage and the lease were part of the same transaction. It was, therefore, held that a previous suit based upon the lease was for satisfaction of a claim arising under the mortgage. 432 per year which was interest at three per cent per annum on the principal sum. The terms of the lease indicated that the mortgage and the lease were part of the same transaction. It was, therefore, held that a previous suit based upon the lease was for satisfaction of a claim arising under the mortgage. It was said that a mortgagor can secure the benefit of Rule 14 of Order 34 only in these cases in which it can reasonably be inferred that the decree for payment of money has been passed in satisfaction of a claim arising under the mortgage, in other words only in those cases in which the Court is satisfied that the transaction in question was a part and parcel of the mortgage transaction itself. 7. The learned Judges went on to say that: such a case can arise not only where the decree for payment of money arises out of the mortgage deed itself but also where there are more than one separate deeds which are so intimately connected with-each other as could reasonably be said to form parts of the same transaction. 8. In our opinion the principle enunciated in this case does not help to solve the controversy before us. 9. The third case to which reference was made on behalf of the Appellant is Puran Chand v. Har Parsad (1995) 16 Lah 640. There the earlier suit was for interest due in respect of a mortgage and a personal decree against the mortgagor was obtained. Later the mortgagee instituted a second suit for recovery of further interest by sale of the mortgaged property. This suit was dismissed by the dial Court and the Court of first appeal on the ground that it was barred by the previsions of Order 2, Rule 2, CPC The mortgagee went up in second appeal to the High Court and a reference was made to a Full Bench. The learned Judges constituting the Full Bench laid down that as the right of the mortgagee to recover the money from the in tragic personally arose out of the covenant to repay the loan and his right to realize the security accrued from the hypothecation each of these two lights for tights an independent and divinity cause of action. 10. The learned Judges constituting the Full Bench laid down that as the right of the mortgagee to recover the money from the in tragic personally arose out of the covenant to repay the loan and his right to realize the security accrued from the hypothecation each of these two lights for tights an independent and divinity cause of action. 10. A mortgagee, it is clear, was cot bound to sue for the realization of his security in a suit to enforce a personal covenant of the mortgagor to pay the overdue interest. The easier suit was founded upon the mortgage, and Order 34, Rule 14, CPC therefore, was undelibtedly applicable. The case has hardly any relevancy to the facts before us. invited, namely Indarpal Singh v. Mewa Lal (1914) 36 All 644; Firm Ayili Mallappa Sanna v. Parasetti Sidramappa AIR 1937 Mad 501 and S. Shaukat Ali Vs. B. Sheo Ghulam and Another, AIR 1936 All 663 . In the first two cases the earlier suit was in respect of a mortgage but a simple money decree was alone prayed for. The satisfaction of decree, however, could not be obtained and the mortgagee subsequently sought a decree against the property in a subsequent suit. It was held that Order 2, Rule 2 did not operate as a bar, In the last case it was held that by a mere declaration that the mortgage security has been relinquished the mortgagee does not become entitled to put the mortgaged property to sale in execution of his simple money decree, because the decree which he obtains is in satisfaction of a claim arising under the mortgage and his declaration that he give up the mortgage security unsupported since it is by consideration might not be capable of enforcement and cannot be regarded as an extinguishment of the mortgagee right. 11. These three cases, in our opinion, are of no assistance in deciding the controversy before us because in each of them a simple money decree was obtained on the basis of the mortgage. We may, however, incidentally mention that in Shyam Sunder v. Mst, Chandan Devi 1939 O.A. 565 : O.W.N. 227 a Bench of this Court took the view in a mortgage suit where the claim against the property is expressly abandoned Order 34, Rule 14 did not apply as the mortgage no longer subsists after the relinquishment of security. 12. We may, however, incidentally mention that in Shyam Sunder v. Mst, Chandan Devi 1939 O.A. 565 : O.W.N. 227 a Bench of this Court took the view in a mortgage suit where the claim against the property is expressly abandoned Order 34, Rule 14 did not apply as the mortgage no longer subsists after the relinquishment of security. 12. The lower Court has observed that the money decree obtained by the District Board was not in respect of the claim arising under the security deeds of 1929 It was a pure money claim based on embezzlement, and that Order 34, Rule 14 CPC does not therefore take the present suit out of he operation of Order 2, Rule 2. In support of this view tie leered District Judge has referred to the case of The Official Assignee of Bombay Vs. Moulvi Abdul Hayee, AIR 1933 Bom 437 . It was said in the aforesaid case that at the time when the Respondent started his suit in Karachi he held two rights first to recover the Rs. 1,000 as moneys held in trust for him, and, secondly, to recover the money in debt. Having taken a personal judgment for the amount without taking steps to preserve his remedies based on the moneys being held in trust, it appears to me that the effect of Order 2, Rule 2 is that the Respondent has lost right to enforce the charge based on the doctrine of trust. 12. The view taken by the Court below Is correct. This appeal, therefore, fails and is accordingly dismissed with costs. The stay order dated 16th April, 1943 is vacated.